The Brazil behind the Cup

by Mateo Pimentel / May 30th, 2014

As billions from around the globe await the World Cup in advent, the social and political situation is sure to grow more polemic for the Brazilian people. Untold amounts of money will change hands; untold numbers of unassuming foreigners will trickle into and saturate Brazil. But who will benefit from the economic boom wrought by this year’s soccer circuses?

Possibly, one of two realities will emerge. Either people from around the world will witness the curious amount of civil unrest that couples the looming soccer celebration, scratching their heads about the mix, or, by peering into the history that will undoubtedly drive the tumult between the moneyed class and its ill-begotten in-house alienation, the global community’s response will be one of support and solidarity for Brazil’s alienated and oppressed.

Whichever the case may be, in a time when jingoists, pundits and bloggers are wont to signal Brazilian unrest and to mock it, or to rebrand it as something other than what it is, the global response must seek the promotion of social justice. To support the marginalized and disenfranchised, who are sure to receive the brunt of labor without just compensation (thanks to centuries of pillage and warped policy in Brazil), it is all the more important for the global community to revisit some important elements of Brazilian history, old and new. Armed with such information, this World Cup need not only focus on futebol; it can help bolster the popular social justice movements in Brazil that surface.

20th Century Brazil

Despite the already centuries-long list of foreign malpractice and its newer, 20th Century woes, Brazil attempted to plot its own course for economic progress in the early 1960s. The idea behind Brazil’s more autonomous plans was that Latin America, as a bloc, could realize powerful trade. The dream was perhaps to rival the maturing economies of Europe and North America. Brazil even had the president for the job: João Belchior Marques Goulart, an economic nationalist largely dedicated to land redistribution. Brazil seemed poised for change.

Within those first few years of the 60s, Brazilians dared to dream of greater purchasing power on a personal level; they dared to imagine higher wages. Goulart seemed to take all the necessary steps in the direction his nation wanted to go. He planned on foreign multinational firms reinvesting profits in Brazil, rather than simply allowing them to rob the country of the wealth it produced—something foreign interest had done for centuries.

Of course, the wallets of many foreign firms were about to get noticeably lighter. Naturally, the United States intervened indirectly. A US-backed junta led by General Humberto Castello Branco usurped Brazilian sovereignty, essentially leaving the people sans democratic control of their country. Fascism once again intruded; the US and the General’s intentions of robbing the Brazilian people of their democracy was meant to bludgeon their right to co-operate the economy for Brazil’s benefit, not that of foreign multinationals and the other usual suspects.

By the mid 1960s, this undemocratic and illegitimate regime decided to reverse Goulart’s democratic and socially just programs. The end goal was to once again subjugate Brazil and prostitute all its resources to foreign interest. Thus, it set the precedent for future degradation of Brazil’s ecology, echoing empire’s age old reminder to Brazil that it should kneel before profit.

Brazilians enjoyed some freedoms under the puppet regime for a time. Democratically, they employed what rights they had to vocalize their ire at the increasing poverty. They blamed the pro-profit, pro-business programs designed by America’s economic henchmen. When the students marched, the regime likely intuited its pending doom. It then began systematically torturing Brazilians, but first, it took away their freedoms entirely. The economy was also tortured with indenturing burdens of debt. Brazil’s debt doubled from $50 billion to $100 billion in roughly half-a-decade. Along with becoming one of the most economically unequal countries in the world, it had become completely undemocratic.

Although Latin America experienced a great deal of growth from 1950 to 1970, there was a large-scale disassembly and abortion of state-sponsored development and state-run programs. These were the taproot of the region’s economic success. Latin America had a democratic feel to it that lead collective groups to seek greater political and social democracy. Indeed, they wanted to buffer themselves from the usual economic predation of the upper classes and foreign interests. Furthermore, this specific twenty-year growth period had been more evenhanded, more evenly distributing of wealth, than anything that was to come. Drawing the unmistakable distinction between the US-backed junta in Brazil, and the epoch when Latin America largely controlled its own finances and economic destiny, underscores what has happened to Brazil since.

In the 1990s, President Fernando Henrique Cardoso promised to rescue Brazil from inflation. He tied his country closer to the dollar, widened foreign access to its riches, and favored a good deal of privatization. A decade later, Brazil reconsidered its direction; its people no longer stood to be victimized by international banks and their untenable game of lending. Brazil owed 260 billion dollars. Debts never ended and repaying loans was a chimera. Some speculate that Brazil might have sold its state firms, which it manicured in the 70s and 80s, in order to pay its debt. For that matter, Brazil might have simply left its projects in infrastructure to waste away, unfunded. Nevertheless, none of these options mattered much given the fact that Brazil’s debt was virtually non-repayable.

Under Lula

Leftist presidential candidate Luiz Inácio Lula da Silva promised Brazil something different in the early 2000s: Fixing the top-heavy income distribution and making sure money borrowed reach the masses. The resulting 4% growth from 2004 to 2010 helped reduce poverty, address income disparity, ameliorate drastic amounts of unemployment, engender democratic policy, etc., all of which helped see Brazil through the Great Recession.

Notwithstanding the upswings ushered in after Lula took the helm, one major macroeconomic problem persisted. Namely, Brazil’s attempt to address inflation meant the value of the reais, Brazil’s national currency, was increased. The philosophy behind this mechanism is simple. Brazil wanted to temporarily increase interest rates with the hopes of increasing influxes of capital, while also lowering prices of imports in order to lower inflation. The concocted value of the reais also meant that cheap imports stood to harm the overall productivity of Brazilian commodities and commerce in general. Thus, the higher the reais, the lower the competitiveness of Brazilian goods in the world market.

In 2007, the Rio-based Economy and Energy Institute released a study indicating that in the decade spanning the mid-1990s to the mid-2000s, carbon dioxide output increased nearly 50%. This trend in Brazil’s pollution ostensibly demonstrated that it pollutes more than it generates wealth. Part policy, part foreign meddling, today’s Brazil is one of the world’s largest polluters. As the last century witnessed the greatest exploitation of one of Brazil’s most important natural areas in Brazil, its rainforest basin, the toll on Brazil’s ecology hits economically harder now than perhaps ever before. Yet, if some of the negative ecological effects felt today have anything to do with policy coming from Brazil, and not merely foreign vultures, then it is also important to know the truth behind this reality.

Another element of Brazil’s economic “turnaround” under Lula involves China. Within first few years of the 2000s, China usurped the US’ coveted role as Brazil’s biggest trade partner. Brasilia-American relations changed and Brazil was emboldened; despite the fact that the US was a key trade partner at the time, Brazil risked both confronting and denouncing the US, protesting some 3 billion dollars in direct subsidies that cotton farmers receive from their Yankee government. These subsidies invariably violated the WTO’s trade rules, and in 2005, the WTO reified the fact that the US flagrantly distorted international cotton prices. Cotton complaints, however, were not the last item on the new agenda. To the chagrin of many foreign firms, Brazil allowed its pharmaceutical companies to ignore US patents as they endeavored to produce their own version of many indispensible drugs. Brazilian exports jumped some 65% in 2008 alone, jumping upwards of $6 billion. Sino-Brazilian relations grew, climaxing with an $800 million credit loan between China’s Development Bank and Brazil’s National Bank for Social Development. China, in return, was to receive handsome amounts of oil.

Lula’s government busied itself, arranging plans to ensure that the benefits of Brazil’s new economic upswing would reach the general masses as was promised. Rather than funneling money into the pocket linings of conglomerates and multinationals, Lula proposed at least four bills, even one creating a “shared production” when partnering with foreign oil corporations. Bravely, Brazil’s government established a fund to channel proceeds toward social spending, poverty relief, infrastructure, education, etc. The Lula government even infused the national income average with cash handouts.

The economic changes in the first decade of the 2000s did not go unaffected by the governing and terrorism of decades past. Problems involving infrastructure still plagued Brazil. A single power outage in Brazil might easily affect millions of people across the South American continent. Hence, government officials often find themselves in a quandary as they seek to root-out such problems, which ultimately reach farther than most today might care to think. Such issues in power have serious economic consequences. A Brazilian hydroelectric dam such as Itaipu, for example, can easily suffer unforeseen systematic failures. The Brazilian Balbina dam actually flooded some 1,000 square miles of the rainforest, polluting more than 20 million tons of carbon dioxide and more than a thousand tons of methane within the first few years of its construction. This carbon and methane pollution is troubling; methane, as a greenhouse gas, is roughly 20 times more powerful than carbon.

Coupled with the fact that some 80% of Brazil’s energy consumption can emanate from hydropower and its ensuing electricity, Lula defended the construction of such dams and energy sources, saying that Brazil needed them in order to sustain annual growth in excess of 5%. Thus, the rainforest has been sacrificed in part for the energy. Experts argue, however, that had Lula switched to alternative means of energy, Brazil would be on track to meet its energy needs beyond the year 2020. Brazil might save $15 billion from these clean technology alternatives. The difficulty is that so much of Brazil’s directives still depend on international demand.

Ultimately, nothing is simple when it comes to Brazil and energy. The electrical sector has called pro-clean energy bastions “utopian environmentalists,” effectively furthering the divide between profit and planning. It looks as though hydro energy is here to stay, especially as the Ministry of Development, Industry and Foreign Trade as well as the Brazilian National Development Bank continue to reap the sweet rewards of this profit-driven energy source.

Brazil Today

All things considered, the future of Brazil’s public policy and economy remains uncertain. In the middle of 2013, Brazil’s social unrest surrounding free transportation seemed t0 echo student movements of decades past. Sao Paulo played host to street protests against tariff increases, which then spiraled into protesting the privatization of public service, ungodly amounts of money for private World Cup groups, and against the extremely poor quality of public health, schools and urban public transportation.

Let us not forget Brazil’s Movement of Landless Workers that has put Brazil on the map vis-à-vis social protest and democratic agendas bubbling up from the margins. Many of these protests result directly from public anger and disgust regarding the urban structural crises incurred by the financial sector’s capital speculation. Said crises that result in soaring rent rates, enormous car sales backed by banks, and anarchic traffic without viable public transportation options—all of which effect the poor and middle class.

President Dilma Rousseff, Brazil’s current president and previous Chief of Staff under Lula, has certainly made an impression by railing against Brazil’s banking oligopoly, whose financial/banking institutions have done little to help with plaguing interest rates. Even though Brazil’s subpar growth in very recent years has hurt it, Rousseff has claimed to side with the poor, that Brazil’s will not tolerate and recoil for its progressive path. Only time, as it is shaped by mounting social pressure, will tell.

Rousseff also heralded the end of poverty. Along with an increased foreign direct investment filtering into the country, an unprecedented $67 billion in 2011, unemployment was lower and wages were rising. The federal program Brasil Sem Miséria added nearly three million of Brazil’s abjectly poor to a list of possible welfare recipients. More than twenty million received extra cash in order to bump them over the absolute poverty threshold. Speculation as to whether an additional 30 billion reais might help the remainder of an impoverished 2.5 million to rise from extreme poverty. Of course, wealthy Brazilians mourn assistencialismo, or welfare-ism. Some also condemn Brasil Sem Miséria as insufficient, arguing that 70 reais per person is insufficient economic assistance for workers who have to travel untold distances just to work.

After the 2013 BRICS leadership summit, Rousseff returned to a country swamped with expectations. While both she and her predecessor, Lula, may not be the most progressive leaders when it comes to championing environmental sustainability over business interest, they nonetheless shine before the dark pedigree of often murderous luddites that have come before them. Even when compared with the other members of BRICS, Yale-Columbia’s Environmental Performance Index lauded Brazil as having made great strides to clean up. This will become increasingly important as Brazil compares how much wealth it generates with the amount of contamination it pollutes.

Brazil benefits economically from its extremely productive agriculture sector and sweeping oil fields, and perhaps also from a stronger legal system than its BRICs—Brazil, Russia, India, China and South Africa—counterparts. China continues to devour Brazil’s unending commodities. But because of the global effects suffered by the majority of nations caught-up in the global economy, Brazil disappointed many with a diminished growth of 2.7% for 2011, and an abysmal 0.9% in 2012. Nevertheless, many Brazilians, who were once bound to poverty, have benefitted from Brazilian social safety nets. This has allowed Brazilians to weather downturns, exploding wealth inequality, and the nominal growth of the Brazilian middle class.

Despite so many problems that are sure to surface in the public sphere during this World Cup, Brazil is still an incredible emerging market. Thanks to doubled minimum wage and grants, inequality has, to some degree, lessened. Thanks to the universalization of primary education twenty years ago, coupled with increased welfare payouts and a rise in the minimum wage, Brazil may have a chance to actually benefit from whatever future growth might occur in coming years. Still, Brazil’s work force will slowly be overtaken by an unmistakably increasing pension demand. For now, the minimum wage in Brazil is roughly three times that of Indonesia or Vietnam. Brazil can hope to grow but not without democracy and not without the support of the global community for its social justice endeavors.